Distribution of personal income tax changes in Slovenia

Cok, Mitja and Sambt, Joze and Kosak, Marko and Verbic, Miroslav and Majcen, Boris (2011): Distribution of personal income tax changes in Slovenia.

Abstract

Slovenia belongs to a group of EU member states that have reduced their personal income tax burden during the current financial and economic crisis. The latest changes, introduced in the personal income tax system during the last two years, have primarily reduced the tax burden on low-income taxpayers. However, this was only the last step in a series of personal income tax reforms since 2004 that have on average reduced the tax burden on all taxpayers. Using an exclusive database of taxpayers and utilising a general-equilibrium modelling platform, we assess the consequences of these reforms at both the micro and the macro level. From a macroeconomic point of view, the initial positive consequences of higher private consumption and welfare are declining over time due the increased budget deficit and reduced investment.

• Item Type: MPRA Paper
• Language: English
• Keywords: general equilibrium model; income inequality; macroeconomic effects; microsimulation; personal income tax; Slovenia; tax reform
• Subjects: D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions; D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H24 - Personal Income and Other Nonbusiness Taxes and Subsidies; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities ; Redistributive Effects ; Environmental Taxes and Subsidies

References

Bayar, A. – Mohora, C. – Majcen, B. – Čok, M. – Opese, M. – Verbič, M. – Kump, N. (2006): An analysis of complex sectoral and macro effects of the tax reform and reform of social transfers with a dynamic general equilibrium model of the Slovenian economy. Ljubljana: Institute for Economic Research.

Bayar, A. – Majcen, B. – Verbič, M. – Mohora, C. – Opese, M. – Čok, M. – Lavrač, I. – Ogorevc, M. – Mavrič, A. (2011): Upgrade of the recursive dynamic general equilibrium model of the Slovenian economy in the period 2007–2009. Ljubljana: Institute for Economic Research.

Blažić, H. (1999): Potrošnja kao mjera jednakosti: primjer Hrvatske. Financijska praksa, 23(3): 355–374.

Chamber of Accountants, Financials and Auditors of Slovenia (2010): Provisions on charges. Ljubljana: Chamber of Accountants, Financials and Auditors of Slovenia.

Čok, M. (2007): Reforms of the Slovenian personal income tax system. Economic and Business Review, 9(4): 351–361.

Čok, M. – Domadenik, P. – Redek, T. – Verbič, M. (2009): Labour market reforms in the context of political power theory: The case of Slovenia. Proceedings of Rijeka Faculty of Economics, 27(1): 57–82.

Easterlin, R. A. (1974): Does Economic Growth Improve the Human Lot? In: David, P. A. – Reder, M. V. (eds.): Nations and Households in Economic Growth: Essays in Honor of Moses Abramovitz. New York: Academic Press, pp. 89–125.

EU Commission (2010): Taxation trends in the European Union. Brussels: Office for Official Publications of the European Communities.

Fuest, C. – Peichl, A. – Schaefer, T. (2008): Is a flat tax reform feasible in a grown-up democracy of Western Europe? A simulation study for Germany. International Tax and Public Finance, 15(5): 620–636.

Government Office for Growth (2005): Guidelines for economic and social reforms for the increase of economic growth and employment. Ljubljana: Government Office for Growth of the Republic of Slovenia.

Hall, R. E., Rabushka, A. (1995): The flat tax. 2nd ed., Stanford: Hoover Press.

Harrison, G. W. – Kriström, B. (1999): General equilibrium effects of increasing carbon taxes in Sweden. In: Brännlund, R. – Gren, I.-M. (eds.): Green taxes: Economic theory and empirical evidence from Scandinavia. Cheltenham, UK: Edward Elgar, pp. 59–108.

IBFD – International Bureau of Fiscal Documentation (2008): European tax handbook. Amsterdam: International Bureau of Fiscal Documentation.

IMAD – Institute of Macroeconomic Analysis and Development (2010): Autumn forecast of economic trends 2010. Ljubljana: Institute of Macroeconomic Analysis and Development of the Republic of Slovenia.

Ivanova, A. – Keen, M. – Klemm, A. (2005): The Russian ‘flat tax’ reform. Economic Policy, 20(43): 397–444.

Klun, M. (2009): Pre-filled income tax returns: Reducing compliance costs for personal income taxpayers in Slovenia. Financial Theory and Practice, 33(2): 219–233.

Majcen, B. – Verbič, M. – Knežević, S. (2005): The effects of foreign trade liberalisation and financial flows between Slovenia and the EU after accession. Post-Communist Economies, 17(2): 251–267.

Majcen, B. – Čok, M. – Verbič, M. – Kump, N. (2007): Development and usage of the microsimulation model. Ljubljana: Institute for Economic Research.

Majcen, B. – Verbič, M. – Bayar, A. – Čok, M. (2009): The income tax reform in Slovenia: Should the flat tax have prevailed? Eastern European Economics, 47(5): 5–24.

Moore, D. (2005): Slovakia's 2004 tax and welfare reforms. IMF Working Paper 133, Washington, DC: International Monetary Fund.

OECD – Organisation for Economic Co-operation and Development (2006): Reforming Personal Income Tax. Policy Brief March 2006, Paris: Organisation for Economic Co-operation and Development.

Slabe-Erker, R. – Lavrač, V. (2011): The application of multiple criteria assessment of production sectors on increasing quality of life. Društvena istraživanja, 20(2): 337–357.

Sorenson, P. B. (2006): Dual income tax: Why and how? FinanzArchiv, 61(4): 559–586.

Verbič, M. (2007): Varying the parameters of the Slovenian pension system: An analysis with an overlapping-generations general equilibrium model. Post-Communist Economies, 19(4): 449–470.

Verbič, M. – Majcen, B. – Ivanova, O. – Čok, M. (2011): R&D and economic growth in Slovenia: A dynamic general equilibrium approach with endogenous growth. Panoeconomicus, 58(1): 67–89.

Zee, H. H. (2005): Personal income tax reform: Concepts, issues, and comparative country developments. IMF Working Paper 87, Washington, DC: International Monetary Fund.